echnical Assistance to the Somali Micro-Finance - Mercy Corps, Ethiopia

Closing date:  24 Dec 2011

Background

In April 2009, the Office for Foreign Disaster Assistance of the United States Agency for International Development in Ethiopia (OFDA/USAID/Ethiopia) awarded Mercy Corps the Revitalizing Pastoral/Agricultural Incomes and New Markets (RAIN) project. This innovative three-year initiative holds as a core component establishing and ensuring access to finance for the vulnerable population of the Somali Region of Ethiopia.


On January 31, 2011 the National Bank of Ethiopia (NBE) registered the Somali Microfinance Share Company (SMFSC). The 53% government owned company is a pioneering achievement of private Somali investors, local NGOs, the Somali regional government and Mercy Corps. As of July 2011, the SMFSC was capitalized with 20million birr by the Somali Regional government (13.05m loan fund and 6.94m operational funds).

I. Problem Statement

The SMFSC seeks to find an avenue enabling its Executive Management Team, Board of Directors, Sharia Compliance Committee (SCC) and other key community decision shapers and makers to develop an institution capable of being managed and structured with proven policies, procedures, products and services connecting with the current Somali context, its anticipated Somali clients, markets and needs. Having exhausted all viable options for technical assistance both within Ethiopia and neighboring Somaliland, the unique contextual challenges of the region, clientele and existing human and institutional resources leads the SMFSC and Mercy Corps’ RAIN project to pursue expertise outside the region. 

II. Proposed Solution


The SMFSC and RAIN project propose soliciting external technical expertise in the area of Islamic microfinance institution building and product/service development and rollout to enable the SMFSC to address the challenges and opportunities of establishing and growing a Sharia-compliant MFI in the Somali region of Ethiopia.


The proposed technical assistance (TA) will include the following main phases:


Phase 1:
Analysis of the Somali context for factors affecting development of microfinance services and products, and growth in the market.


Phase 2: Customized training of key SMFSC staff and community leaders in critical aspects of Sharia-compliant MFI establishment and growth, product/service development and rollout, community relations, other key aspects to be identified in Phase 1.

Phase 3: Post-training, in-country institutional Technical Assistance to SMFSC leadership at the ground level in Jijiga ensuring effective utilization and integration of gained knowledge. 

III. Proposed Action


The SMFSC and RAIN project propose contracting a highly capable and experienced technical assistance and training provider to bring the capacity of the SMFSC up to a level sufficient for its success in the region. To achieve this, at a minimum the below key actions will need to be undertaken.


A. Analysis of Somali Context for Financial Services, Products and Expansion – the TA provider will carryout a discovery trip to Ethiopia focusing its study on the unique operating context that is the Somali region as well as Federal Ethiopian regulations, the Islamic microfinance/banking capabilities of SMFSC mangers, Board, SCC and other critical decision shapers/makers. This phase will generate an in depth understanding of the critical market variables and context necessary for successful reception by, enrolment in and utilization of the SMFSC services by the target clients. As part of this analysis phase, the TA provider is expected to employ a variety of participatory knowledge and information gathering techniques necessary to provide the TA provider all information necessary in customizing an intensive training program appropriate for key SMFSC managers, Board and SCC members.


B. Customized Training of Key SMFSC and Community Leaders – the TA provider will develop and deliver a customized, intensive training program appropriate for key SMFSC managers, Board and SCC members. This training will expose the participants to and build on the TA provider’s broad range of experience, lessons learned, best practices and innovations the TA provider is intimately familiar with in the areas of Sharia-compliant microfinance. The training will be intensive, covering anywhere from 10-20 business days at the TA provider’s training center in an Islamic country including visits and meetings with at least four high-functioning Islamic MFIs ranging from small- to large-scale institutions targeting rural and urban customers, with livestock-based livelihoods a key market segment studies. Designed primarily to bridge gaps in diagnosed capacity as analyzed in the Analysis phase, this training may also cover areas of MFI management, market analysis and development, product and services development and rollout, scaling institutions, opening new branches, developing appropriate training and operational manuals, designing and conducting effective recruitment, attracting women, youth, very poor and other often difficult to access client groups, strategic leadership, government-business relationships and business-Islamic community relationships.


C. Follow-up Technical Assistance – Once the SMFSC delegation has completed their intensive training, the TA provider will assume the role of technical advisor placing a senior level TA provider within the SMFSC main office in Jijiga, Ethiopia for a period of no less than two and a half (2.5) months. In this capacity, the TA provider will help guide the SMFSC leadership team as they operationalize their training into practice. This will cover all areas from product/service updating, updating procedural manuals, training/re-training SMFSC management and line staff, developing marketing strategies and campaigns, carrying out market assessments, reaching out to SACCOs, and other areas as identified by the SMFSC, RAIN project and TA provider.



IV. Expected Outcomes/Deliverables


This consultancy is expected to deliver the following achievements and outcomes:

Phase 1: Analysis of Somali Context for Financial Services, Products and Expansion


1. Comprehensive plan for achieving Phase 1-3 as stated above, before the beginning of Phase 1.


2. Market survey at least 125 potential clients in 4 key markets, as well as important stakeholders and actors either directly involved in or with influence over the micro-financial services sector in the Somali region of Ethiopia.


3. From the survey, assess the appropriate financial needs and preferences of the target clients and stakeholders of the key markets in the region, and develop a proposed system for the SMFSC highlighting key aspects of success and potential danger areas to be mitigate. This assessment, its findings and proposed system will be documented and submitted to the SMFSC General Manager and Board Chairman, as well as a copy to Mercy Corps Ethiopia RAIN Chief of Party at the end of Phase 1 and before the start of Phase 2.

Phase 2: Customized training of key SMFSC staff and community leaders:


4. Develop, organize and deliver a customized, intensive training program appropriate for key SMFSC managers, Board and SCC members. This training will expose the participants to and build on the TA provider’s broad range of experience, lessons learned, best practices and innovations in the areas of Sharia-compliant microfinance. The training will be intensive, covering 10-20 business days at the TA provider’s training center in an Islamic country with a central component being visits and meetings with at least four high-functioning Islamic MFIs ranging from small- to large-scale institutions targeting rural and urban customers, with livestock-based livelihoods a key market segment studies.


5. Present to the SMFSC delegation Islamic MFI best practices from around the world, in particular examining how Islamic MFIs are meeting the financial needs of the hard to reach poor.


6. Develop and deliver a training program with the aims of improving the SMFSC senior management team’s capacity to address complex issues utilizing appropriate mechanisms and internal control systems translating the organization objectives in to action.


7. Train the SMFSC to develop and establish systems and procedures that are customer friendly; facilitate the smooth and efficient flow of information; and employ and promote transparency best practices as part of the institution’s operations and policies.


8. Modify and develop Islamic microfinance products that meet the needs of local community, while fitting to Islamic banking principles and nomadic lifestyle of the target population.


9. Organize and facilitate all travel and hosting related aspects of the intensive training, including but not limited to all visa related documents, invitations, expediting; all travel, lodging, site visit and training related logistics and expenses; all insurances necessary for the SMFSC delegation; any other logistical aspect related to the delegations travel from Ethiopia until their return after completion of the training.

Phase 3: Follow-up TA:


10. Embed a senior level technical advisor within the SMFSC in Jijiga to work alongside the senior management to adopt, adapt and operationalize the training into the daily and strategic capacity of the SMFSC. The senior technical advisor will ideally be the same individual from Phase 1 guaranteeing a continuity of learning and relationship development over the course of the proposed technical assistance. The Advisor will also work closely with Mercy Corps’ RAIN project team to ensure smooth transfer and translation of the learning to the field level.


11. Alongside the SMFSC, recommend modifications to key documents of the SMFSC including its 5 years business plan, administration manual, financial manual, operational manual, and internal audit manual based on Islamic Financial system especially MFI which are required for the success of the new MFI in Somali Region. List of identified issues with the existing documents, as well as proposed rectifications compiled in a report with copies submitted to SMFSC senior management and to Mercy Corps Ethiopia RAIN Chief of Party.


12. Review and modify the SMFSC’s rollout strategy for engaging key markets in a systematic and effective way over the next 3 years, with the ability to reach 150,000 clients (roughly 25% of the marketable population).


13. Identify key benchmarks appropriate for the SMFSC, and Mercy Corps as its current primary technical support partner compiled in a report with copies submitted to SMFSC senior management and to Mercy Corps Ethiopia RAIN Chief of Party.


14. Train the SMFSC in the basic principles of and best practices in creating a learning organization, and instilling a culture of organizational and individual learning and excellence.


V. Proposed Timeframe


The TA provider is expected to commence Phase 1 of the proposed TA no later than the end of October, 2011. Phase 2 is expected to commence no later than Dec 15, 2011. Phase 3 is expected to commence no later than January 15, 2012. The consultancy and all its deliverables are expected to be delivered and concluded by March 31, 2012. Overall, the proposed timeframe covers October 31, 2011 to March 31, 2012, approximately 6 months.


VI. Specific Qualification Requirements


Due to the complex cultural and institutional contexts, the following basic criteria should be met by any consultant to increase the chances of fit and acceptance by the SMFSC and its key partners in this sector. The TA Providers must have a strong and demonstrated background in Islamic MFI institution strengthening - preferably institution start-up, have demonstrated ability to analyze the Somali context and adapt their training program accordingly, and excellent English and Arabic speaking and writing. They must have a documented track record of success training Islamic MFIs to successful implementation phase. They must have a well recognized intensive training program which includes high impact exposure visits to a diverse cross-section of Islamic MFI institutions.


Able to secure visas for Ethiopian trainees to attend training in the proposed host-country training program is a must.


Ability to comply with the United States government’s certification regarding terrorist financing.


VII. Allowable Costs


This consultancy allows the following costs:

- International airfare between TA provider’s country of origin and Ethiopia

- Costs associated with the preparation and execution of Phases 1-3

- Fees as documented by the TA provider and within the reasonable levels as pre-approved by Mercy Corps


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